PORT Stephens Council racked up $2.779 million in legal expenses in 2018 and is prepared to pay another $1.825 million in legal costs in 2019 after admitting liability in court in the long-running Nelson Bay Lagoons Estate flooding case.
The council is under pressure to end its silence over the case which will continue until at least February, 2020 when it will fight a multi-million dollar damages claim by the Lagoons developer.
But some councillors have confirmed they share community concerns about the case which a veteran councillor described as "a bit of a tragedy" that could cost ratepayers $15 million in total, and which another described as the "number one threat" facing the council.
"We should have bought the land for $8-10 million years ago and we would have saved ourselves and the community a fortune," said former Port Stephens mayor and current councillor John Nell.
"My gut feeling is the total cost is about $15 million. I'm not even sure of the details of the argument at the moment. There's always another argument. It's totally bizarre," he said.
The council is under even greater pressure over its handling of the Lagoons Estate flooding dispute - which started in the 1990s and includes the council admitting last year that it had not complied with a 2006 court order - after criticism from the state's pricing regulator on Monday over a controversial rates hike bid.
The Independent Pricing and Regulatory Tribunal rejected the council's bid to raise rates by 69.5 per cent over seven years because it was "not clear the additional revenue is needed to meet infrastructure backlog or renewal requirements".
While volume one of the council's 2017-18 annual report noted it spent $272,955 on the Lagoons case between July, 2017 and June, 2018 as part of a total legal fees bill of $409,735, volume two recorded $2.779 million in council legal expenses, with an additional "legal costs provision" of $1.825 million at the end of 2018.
The $2.779 million was more than four times the average annual legal expenses recorded in council annual reports, and was challenged by Port Stephens Councillor Giacomo Arnott at a council meeting on November 13 as a "pretty massive increase".
The meeting was told the increase was due to "an on-going legal matter" where there had been a "judgment or potential for the judgment". The figure did not include the wages of council's in-house legal team.
On May 9, 2018 the council and Lagoons Estate developer David Vitnell consented to Supreme Court orders declaring the council had failed to comply with a 2006 court order requiring it to stop diverting stormwater discharges from roads and a nearby estate onto the Lagoons Estate.
The council admitted it was responsible for the discharges which caused flooding after consenting to the orders on the eve of a public hearing into the Lagoons case.
The council declined to respond to Newcastle Herald questions in September about the case and its acceptance of liability after it launched its controversial bid for substantial rates hikes.
Councillors contacted by the Herald on Tuesday expressed concern about the case which one, who did not want to be named, described as the "number one threat facing Port Stephens Council at the moment".
"As councillors we don't even know what the council's exposure is, and that's concerning," the councillor said.
Councillor Paul Le Mottee said councillors were advised last year that an agreement had been reached between the two parties and a settlement had been finalised, but they were later told the council and developer are back in court next year and the matter remains "on-going".
"I do agree council should at some point in time publish a full explanatory document about what this has cost," he said.
Councillor Jaimie Abbott said she was "quite in the dark" because she had missed briefings after the birth of her child late last year.
"As far as the legal briefings on this matter I haven't personally been briefed," she said.
Mr Vitnell said he had offered the council "a deal that would save them substantial legal costs but they don't seem to be listening".
"They could blow another $1 million in legal costs if they don't settle it up now," he said.
Mr Vitnell's damages case against the council includes losses he has incurred since 2013 because he has not been able to develop another 50 homes at the Lagoons Estate after the council failed to comply with a court decision in 2006 ordering it to stop stormwater entering the site.
The damages hearing is listed for February, 2020. The council and Mr Vitnell consented to the May, 2018 court orders on the basis of the council not contesting liability and Mr Vitnell not seeking damages greater than $1.5 million.
Later reports are believed to have assessed damages at significantly higher than $1.5 million.
Mr Vitnell initiated court action in 2015 after significant stormwater flooding events on six separate occasions in 2015, over five days in 2016 and in 2018.
The council's annual report for 2015-16 showed legal expenses of $1.483 million.
A council spokesperson said it was "unable to make comment specific to this case" while it remained on-going.